Date of Submission: 18 April 2012

A REPORT

ON

IDENTIFICATION OF RURAL CHANNELS OF

DISTRIBUTION FOR THE SALE OF INSURANCE

PRODUCTS AND PREPARE BUSINESS PLAN

ACCORDINGLY

By

Anurag Mehra

11BSPHH010989

FINO

A report submitted in partial fulfilment of the

requirements of MBA Program of IBS Hyderabad

2 | P a g e

Table of Contents

1. Acknowledgement

2. SIP Certificate

3. Executive Summary

4. Introduction

4.1. Background

4.2. Objective

4.3. Methodology

4.4. Scope & Limitations

5. Industry Analysis

5.1. Porter’s Model

6. Company Profile

6.1. About

6.2. Vision

6.3. Mission

6.4. Investors

6.5. Management

6.6. Partners

6.7. Lines of Businesses

6.8. Solutions

6.9. Services

7. Project Specific Analysis

7.1. Product Profile(Marketing Mix)

7.2. Product Life Cycle

7.3. Competitor’s Analysis

7.4. On site Project Report

7.4.1. Current Strategy

7.4.2. Work Performed

7.4.3. Findings

8. Recommendations

9. Learning from SIP

10. References

3 | P a g e

Acknowledgement

I hereby take this opportunity to thank FINO for providing me with a fruitful association by way

of Summer Internship. This association, however short lasting, has provided me with a

comprehensive insight into the Technical Expertise‘s present in the rural financial inclusion

Industry and pros & cons of the same. I would like to express my deep gratitude to my company

guide Mr. Anand Kumar Tiwari, State Head (Haryana), CDVG department who provided a

constant support, valuable inputs and encouragement in understanding the nuances of the

project.

I would like to extend my sincere thanks to my faculty guide Prof. Rajan Mani of IBS Hyderabad,

for his constant guidance, immense support; motivation and encouragement which inspired me

pursue my project with added interest and enthusiasm.

I would also like to thank my short term colleagues Mr. Lokesh Sharma for his co-operation and

all my friends, and my family members for their, support and help as and when required as well

as for inspiring me to put in my best efforts for this project.

4 | P a g e

Executive Summary

Micro insurance is the provision of insurance services to low-income households, which serves as an

important tool to reduce risks for the already vulnerable population. It is in growth stage in India as

rural market is still untapped in India. My project title was to build a business plan for the sale of

insurance products in rural areas of Sonepat, Haryana. However, my work was to sell insurance

products in rural areas and make new customer enrolments for financial inclusion project.

My methodology in the project was different in both the project works. While doing the micro

insurance, I opted to visit the villages which have customer enrolments i.e. have our bio metric

cards, so that we can do their insurance. We visited these villages at the time of pension distribution

(for old age), the main reason for holding a camp at that place was that people were already

collected over there for a reason and they were our target market at that point of time. My

approach for financial inclusion project i.e. customer enrolments was to visit those villages where we

had low customer enrolments and those villages where customer enrolments were average but

transactions were low.

While doing the project I first tried to understand their current strategy, company did not have any

written strategy for marketing their product. In every village, we have one employee who is

belonging to that village only; we call our employee as “Bandhu” as this name relates to our

consumers. This person is our “Point of connection” with our consumers and plays an important role

in the company’s position in the consumer’s mind. This person always belongs to the village he is

assigned to so that people can believe him and they can rely on us.

After that, I went to sell the micro insurance with the “Bandhu” in villages, as said before we chose

villages with high customer enrolments. While doing the insurance of the people, I talked to several

of them to get the feedback of the company and product. There, I got to know that many of them

were buying our product because of reference i.e. “Word of Mouth” however; they were not aware

about the financial services and knew little less about product and company.

While doing the other project, financial inclusion i.e. customer enrolments, we chose villages where

we had low penetration. In those villages, we adopted “door to door” strategy in some villages and

in others we asked the head/sarpanch of the village to make a gathering, wherein we can tell them

about our services. While doing this project, I talked to people of these villages, and here I got mixed

people i.e. people who are not aware/does not believe in financial services and people who are

aware of these services but do not use as banks are very far. Those who were not aware of

services/who did not believe in these services, we told them about our services and its benefits in

their lives. Those who were not using these services, because of other reasons such as banks far

way, we made their biometric cards and enrolled them so that they can operate their account from

their village only.

My recommendation is to hold “Financial Literacy Program”, wherein we can hold camps to educate

rural people about financial services and its benefit in their life. By this medium we will be able to

grab higher market which is still untapped and our position will improve in minds of consumers.

5 | P a g e

Introduction:

Background Risk is pervasive in the lives of poor and low-income groups. Economic, social, natural, and other

factors distort household‘s risk management capability and their struggle to come out of poverty.

Faced with multiplicity of risks, poor and weaker sections are often forced to deplete their financial,

physical, social and human assets just to cope with the contingencies. Some common risks they

confront with are unemployment, illness, and accident, death of main earning members of the

family, crop loss, loss of livestock, fire, theft, drought, flood, and loss in petty trading activity due to

market factors. Some groups are more vulnerable to many of these risks than the others and unable

to cope with risk events. Hence, uninsured risk leaves many poor households more vulnerable to the

losses from negative shocks. However, impact of such risks lingers for a longer period depending on

the nature and severity of risks and strategy adopted by the household for coping. On the other

hand, household exposure to risks not only results in substantial financial losses but also the

suffering accentuates the fear and uncertainty relating to the risk. Because of this perpetual

apprehension, many poor households are less likely to take advantage of income-generating

opportunities which could be a way out of poverty.

Risk pooling and informal insurance are not entirely new to many low income households. Informal

risk-sharing practices have been around for generations. Options for protecting against risks includes

diversifying household resources and income, building assets, stocking food, investing in livestock,

renewing & strengthening social networks, saving and borrowing from informal sources,

participating in public social security programme, enrolling in insurance schemes etc. The risk

management approaches differ under socio-economic and agro-climatic conditions and also

depending upon its exposure to risk. Unfortunately, risk coping mechanisms are limited in assuring

benefits and typically cover only a small portion of the total loss of income and income generating

opportunity. Household‘s informal means to manage risks may not provide adequate and long term

protection, especially to poor and low income groups who are prone to loss of entitlements incurred

due to variety of risks. Households follow variety of coping strategies to manage different kind and

nature of risks that affect their income and consumption smoothing. But many informal risk coping

strategies come at a cost, as assets are depleted when trying to cope with risk such as distress sale

during crises, reduction of household expenditure on food, withdrawing children from school,

postponing or avoiding expenditure on health, social functions etc. It has both short term and long-

term adverse impacts on households. Though household diversification often viewed as positive

response against risk events many such coping strategies followed by the poor do compensate the

entire loss. If household risks are not carefully designed and strategically handled it may result in

bigger welfare losses. The situation would be worse when risks to life and livelihoods recur more

frequently and there is limited risk managing options. So provision of formal insurance cover to

these vulnerable groups could be useful to protect them against risks and supplement their risk

managing capacity. As formal insurance can directly impact on households‘ex-post risk coping

mechanisms, it is believed that household’s participation in insurance would help to maintain

income and consumption soothing and avoid asset loss. But access to and provision of formal

insurance is limited for the poor and low income groups. State-provided social security measures are

inadequate to cover all kinds of household risks. Under this condition many poor households may

tend to behave as resilient to risk events or their risk coping behaviour may result in huge welfare

6 | P a g e

loss due to wrongly managed or unable to manage risks. It may also induce many poor households

to focus on low risk and low return activities or rely on a range of informal ex-post options, relief

measures, public social security measures etc. It provides huge scope for policy interventions as well

as business opportunity.

Therefore, it is important from policy point of view to understand different household risks and risk-

management strategies in one hand and the need and demand for insurance products, particularly

for low income groups. On the other hand, interestingly micro insurance has drawn attention of the

policy makers, insurers, business leaders and others in recent years. Micro insurance has been seen

as one of the major risk managing tools for the poor and low income groups and a potential market

for business. Experiences across countries in the world show that micro insurance has potential to

reduce household risk impacts and to provide business opportunity. By offering a payout after the

loss, it may avoid more costly ways of risk coping by the poor household and leaves their future

income earning opportunities intact. The sense of security linked to being insured through micro

insurance augment household welfare with positive impacts. Poverty and vulnerability among low

income groups mainly stems from their poor risk management capacity and exclusion from the

financial markets. Hence it is important to understand their need as well as demand for financial

products including insurance. Many poor and low income households may involve in activities or

enterprises of smaller scale but higher risk and uncertainty. It makes them disadvantageous because

they are more prone to economic and financial collapse. Under this situation it is interesting to

analyze how micro insurance can play a meaningful role in household risk managing efforts, in rural

credit and insurance market and providing business opportunity. In this regard we like to focus on

current scenario of outreach and efficacy of micro insurance in India, major factors that encourage

and prevent growth of micro insurance and other related issues for achieving broader objectives

such as financial inclusion and inclusive development.

Meaning and Definition of Micro insurance:

Micro insurance, commonly called as insurance for the poor, has recently drawn the attention of

practitioners in developing countries. In common parlance, micro insurance is the provision of

insurance services to low-income households, which serves as an important tool to reduce risks for

the already vulnerable population. There is no unanimously accepted definition of micro insurance

despite its profound use and understanding across stakeholders and others. A simple definition of

micro insurance is offered by Churchill (2006) is that it is an insurance that

(i) operates by risk-pooling

(ii) financed through regular premiums and

(iii) Tailored to the poor who would otherwise not be able to take out insurance.

Micro insurance is defined as ―...insurance that is accessed by the low-income population, provided

by a variety of different entities, but run in accordance with generally accepted insurance practices

... Importantly this means that the risk insured under a micro insurance policy is managed based on

insurance principles and funded by premiums‖ (International Association of Insurance Supervisors,

2007). Micro insurance is different from usual form of insurance. A macro definition of micro

7 | P a g e

insurance states that it is the provision of financial protection contingent on the occurrence of

predefined risk in exchange for an ex-ante premium payment affordable to the clients. In terms of

micro definition, micro insurance is more complicated as there are different approaches. ―Micro‖ as

reference to low premium and low benefits may be affordable but it may not be effective enough to

manage risks of different types of different categories of clients. Micro insurance is often believed to

be an important component of a broader set of financial services under microfinance – making

available financial services for poor households and enterprises to sustain their livelihoods. Basically

there are two broad categories of micro insurance often commonly understood – one focused on

extending social protection to the poor in the absence of appropriate government schemes and the

other offering a vital financial service to low-income households by developing an appropriate

business model that enables the poor to be a profitable (or sustainable) market segment for

commercial or cooperative insurers. Micro insurance is also taken as group insurance that can cover

thousands of customers under one contract. It requires an intermediary between the customer and

the insurance company. This intermediary role has been played mainly by non-governmental

organization (NGO) and microfinance institutions (MFI).

Micro Insurance in India

In India development of micro insurance sector and related policy discussions has started few years

back. Within very short period, the sector has drawn attention of policy makers due to its

importance both at household level and the economy as a whole. Two major and recent studies by

the ILO (2004a and 2004b) depict broad picture of micro insurance sector in India. As regard to the

micro insurance products the study highlights that out of 80 listed insurance products 45 cover only

a single risk and only two or three products cover multiple risks. Majority of the insurance products

cover life (52%) or accident-related risks and addressed to individuals. Out of the 12 currently

available health insurance products seven products have been designed and restricted to groups and

five products have chosen to coverage to some critical illness at individual level but not the

reimbursement of hospitalization expenses. Most of the products require a single payment of

premium (i.e., a one-time payment) upon subscription. Private insurers had three times more

products than their public counterparts.

Some important observations about the demand for micro insurance in India are made in a recent

study by ILO (2004b). The study provides details of micro-insurance schemes operational in India.

Out of 51 schemes that are operational in India most schemes have started operations during the

last few years. As regards to beneficiaries, about 43 schemes, for which the information is available,

cover 5.2 million people. About 66% of the micro insurance schemes are linked with micro finance

services provided by specialized institutions or non-specialized organizations. Twenty two percent of

the schemes are implemented by community based organizations, and 12% by health care providers.

Life and health are the two most popular risks for which insurance is demanded. Twenty-five out of

37 schemes received some external funds to initiate their schemes. Twenty out of 32 schemes

received external technical assistance in the form of advisory services, technical services, training or

even referral services for their schemes. As regard, to the regional distribution of micro insurance

outreach about 74 % of total schemes operate in 4 southern states constituting Andhra Pradesh

(27%), Tamil Nadu (23%), Karnataka (17%) and Kerala (8%). Two western states Maharashtra (12%)

and Gujarat (6%) account for 18% of the schemes. About 56% of schemes deal with one single risk.

This shows low outreach and unequal distribution of micro insurance in the country. The study also

reflects the linkage between micro-insurance and micro-finance.

8 | P a g e

Development of micro insurance is often related to microcredit, particularly in developing countries

like India. Though microcredit has dominated in microfinance market the entry of micro insurance is

only in recent past. In India micro insurance is a relatively new financial service and its outreach is

rather limited and unevenly distributed across states. The overall performance of micro insurance in

India is not very encouraging. According to a recent study by UNDP (2007), the outreach of micro

insurance is around 5 million people covering only 2 percent of the poor in the country. It shows

there is huge potential for micro insurance market in the country. A conservative estimation of size

of micro insurance market (both life and non life) in India ranges between INR 62,304.70 to

84,267.55 million (US$ 1,384.55 to 1,872.61 million). In case of life insurance, the market potential is

estimated to be between INR15,393 to 20,141 million (US$ 342.07 to 447.58 million) and in case of

non-life insurance, it is between INR46,911.70 to 64,126.55 million (US$1,042.48 to 1,425.03

million). The non-life insurance estimation is limited to four types of coverage – milch 17 animals,

livestock, health and crop insurance. The population used for this estimation is 40-50 percent of

those earning less than US$1 a day and 50-70 percent of those earning between US$1 – 2 a day. This

is expected to increase as demand grows and a wider range of risks are recognized as insurable.

However, high exclusion of poor and vulnerable groups from formal insurance cover in India is also

evident as per the UNDP study.

9 | P a g e

Objective: Identification of Rural channels of Distribution for the sale of Insurance Products and prepare

business plan accordingly.

10 | P a g e

Methodology

While working in the company, I worked on two different projects, which included field work. They

come under Electronic Benefit Transfer (EBT) scheme of government and company. The two topics

are mentioned below:

Micro Insurance

Customer Enrolments.

Micro Insurance: In this, we were supposed to do the insurance of the rural people and achieve

our targets. Their normal strategies to do insurance are:

Word of mouth

Door to door

However, this time we adopted some new ones.

We chose villages with maximum number of customers enrolled with biometric cards.

We chose the time of the month when pensions are being distributed.

We chose the same place for our camps where pensions are being distributed.

Customer Enrolments: In this, we were supposed to get new customers enrolled with our

company so that they can get benefit from our bio metric cards.

They do not have any specific strategy for the same. “Bandhu”, who is our employee and a person

belonging to village (most of the times) used to do it randomly. “Bandhu” is also responsible for the

transactions from the particular village, he is assigned to.

However, this time we adopted a new methodology i.e. to held camps. But while holding camps, we

carefully worked to the data given to analyse, where to hold them.

We chose a village where the number of customer enrolments is less as compared to others.

We chose villages where the numbers of enrolments are average; however the numbers of

transactions are less.

These are the two different methodologies; we worked on while working on two different projects.

11 | P a g e

Scope & Limitations

Scope

Word of mouth is very strong.

Money is there.

Investment is there but not with banks.

Limitations

Transportation Problem

Language Barrier

Financial Illiteracy

12 | P a g e

Industry Analysis

Porter’s Model

A means of providing corporations with an analysis of their competition and determining strategy,

Porter's five-forces model looks at the strength of five distinct competitive forces, which, when

taken together, determine long-term profitability and competition. Porter's work has had a greater

influence on business strategy than any other theory in the last half of the twentieth century, and his

more recent work may have a similar impact on global competition.

Porter referred to these forces as the micro environment, to contrast it with the more general

term macro environment. They consist of those forces close to a company that affect its ability to

serve its customers and make a profit. A change in any of the forces normally requires a business

unit to re-assess the marketplace given the overall change in industry information. The overall

industry attractiveness does not imply that every firm in the industry will return the same

profitability.

13 | P a g e

Intensity of Competitive Rivalry(High)

As there are firms offering the same service, and many big firms entering into the

segement, this is really high.

Threat of Substitutes(Low)

As, rural people are not much aware of financial services,

substitue product would not work.

Threat of New Comp(High)

As, rural sector is being targeted for financial services due to high

potential, new banks/cpmanies are

entering to tap this sector.

Bargaining Power of Customers(Low)

As, of now this is really low because people in rural sector

are not financially literate.

Bargaining Power of

Suppliers(High) As new firms are entering into this

segment, bargaining power of suppliers

increases.

14 | P a g e

Company Profile

About

FINO founded in year 2006, headquartered in Mumbai, India, has emerged as a leading inventor,

innovator and implementer of integrated technology solutions for institutions like Banks,

Microfinance Institutions, Government entities, Insurance companies to enable financial inclusion

environment for the micro customers.

FINO caters to the industry needs across market segments by undertaking complete electronic

payment platform projects. FINO solutions are anchored around using biometric smart cart, hand-

held devices and Micro Deposit Machines to perform field operations and biometric authentication.

Today FINO, with its leading edge solutions plays a key role in India's quest for developing branchless

banking infrastructure.

Vision

"To provide innovative technical & management services for the masses, in both financial and non-

financial domains making a positive impact on their living standards and creating wealth for all

stakeholders"

Mission

"To achieve a breakthrough in the scale, relevance and reach of financial services for the un-served

and under-served masses throughout the world"

15 | P a g e

Investors

Management

Manish Khera (Chief Executive Officer)

Manish Khera is the Chief Executive Officer and Whole Time Director of FINO Limited. Since FINO's

inception in 2006, Manish has lead FINO's efforts to connect micro-customers with businesses,

banks, government and investors. Under his leadership FINO has dramatically increased its

institutional acceptance, market leadership and global repute.

Manish's career began with ICICI Bank Ltd. in 1993. During his 13 years at ICICI, Manish has worked

in various areas including credit, government & rural banking, technology and alternate channels.

His last role in ICICI was of Joint General Manager heading Alternate Channels Group.

For his leadership and business vision, Manish was conferred as the Young Global leader by World

Economic Forum in March 2011.

Manish holds an M.Phil in Environment & Development from the Cambridge University, UK. He also

holds a MBA from Faculty of Management Studies (FMS, Delhi) and a BE (Electrical) from Delhi

College of Engineering (DCE, Delhi).

16 | P a g e

Rishi Gupta (Chief Financial Officer)

Rishi Gupta is the Chief Financial Officer and President - Sales and Marketing of FINO Limited. His

responsibilities include Corporate Finance, Fund-raising, Investor relationships and Business

Development.

Rishi has more than 15 years of experience in manufacturing, banking and international institutions.

His career has overseen budgeting, accounting, project finance, corporate finance and relationship

management.

Rishi's illustrious career began with Maruti Udyog Limited where he went on to head Budget and

MIS department. Rishi then moved on to join ICICI Bank. Prior to joining FINO, he was working with

the regional office of International Finance Corporation in New Delhi.

In 2011 Rishi was awarded "CFO100 Roll of Honor" - an effort to recognize the top 100 senior finance

professionals in India, who have made a difference with their acumen, attitude and energy.

Rishi is a certified chartered accountant and cost & works accountant. He did his article training with

Price Waterhouse Coopers (PwC). Rishi also holds a bachelors degree in commerce from University

of Delhi.

Rajeev Arora (Director - Products & Operations)

Rajeev Arora is the Director and President - Products & Operations at FINO Limited. He is

responsible for strategizing and overseeing the field & central operations and product development.

Rajeev has over 19 years of experience in operations and banking.

Rajeev began his career with National Thermal Power Corporation (NTPC). Prior to joining FINO, he

was associated with ICICI Bank in Corporate Banking where he was managing relationship with large

corporate, specializing in the infrastructure sector. He has also managed relationship with various

state and central governments extensively to work on various large e-Governance projects focused

on government to citizen interaction and payments.

Rajeev has done is post-graduation in business administration (MBA) from Indian Institute of

Management, Calcutta and holds a bachelors degree in electrical engineering.

17 | P a g e

Partners & Customers

Banking Partners

Government Partners

18 | P a g e

Insurance Partners

Lines of Business

Banking

We make 'anywhere banking' a reality for world's micro transaction customers

FINO has created a robust, safe, and streamlined alternative channel for Banks at lower costs,

making Financial Inclusion financially viable for them, and thus opening up a mammoth customer

base. Not only has this helped Banks, but it has also altered the lives of the beneficiaries - the rural

customers who were excluded from the formal banking system until now.

Government

The Indian government has introduced various schemes for the benefit of the bottom of the pyramid

population of the country. However, there are immense challenges and constraints faced in ensuring

that these benefits reach the correct beneficiaries. These hurdles include the huge amount of

paperwork and human effort involved, a massive information gap, the lack of accessibility and

infrastructure, a largely illiterate populace and above all fool proof identification.

FINO's through its Technology solutions has been working with both state and central governments

for providing (EBT) Electronic Benefit Transfer for the implementation of various Government

schemes including

National Rural Employee Guarantee Scheme (NREGS)

Social Security Pensions (SSP)

Retail

FINO has developed an online micro-payment and delivery platform for a unique bouquet of Value-

added e-Services to the micro customers, at their door-step through partnerships/tie-ups with

various service-providers.

19 | P a g e

FINO Third Party Services aims at first-of-its-kind speedy, convenient, accessible and affordable

channel of online micro-payment system for all customers through its network of FINO-Bandhu &

retail channel.

FINO Third Party Services are available to its customers through secured mobile-transaction systems

as well as Points of Transaction and Backend processing platform

FINO Third Party Services includes following kind of services –

Recharge.

DTH Recharge.

Railway Ticket Booking /Bus booking.

Insurance Premium Collection.

Utility Bill Payments (Mobile & electricity bills, municipal taxes).

SIM card connection selling

FINO Third Party Services will allow our clients to offer their products and services in the rural and

semi urban areas exhaustively resulting in immediate up scaling of customer base and business

revenues for minimal investment with economic payback in short time.

Insurance

FINO's technological solution has proved to be the game changer in the health micro-insurance

sector in India by enabling Insurance companies to reach out to customers at the bottom of the

pyramid and serve their needs, while maintaining financial viability.

As a key enabler and facilitator of financial inclusion, FINO has unlocked a INR 45 billion potential

micro-insurance market for health insurance companies, triggering a sea change in their delivery

system by providing them with the geographical coverage, scalable technology platform and

processing capabilities required.

FINO facilitated the standardization of the delivery platform, back-end database management

system and data maintenance format, effectively solving the issues faced in earlier government

schemes that were plagued by design and implementation problems and were therefore unable to

reach out to the un-served/underserved markets.

Leveraging its experience in the micro-finance sector and applying it to the micro-insurance sphere,

FINO has created a model that is efficient, scalable, sustainable, low-cost, interoperable and

simultaneously profitable.

Technology

FINO solutions enable distribution of financial services in remote locations with minimum

connectivity and infrastructure.

20 | P a g e

The user entities can enrol customers in the field and issue smart cards as well, if required.

This customer data collected during the enrolment process needs to be uploaded to the backend

systems for data de- duplication checks, account opening and reporting purposes.

Customers can transact in the field through a number of media such as ATM/ Micro Deposit

Machine, POS and/ or mobile. These transactions can be pushed to the backend Core Banking

System either in an online mode or offline mode depending on the business requirement and

connectivity available.

Supporting these functions are different systems which perform very different supporting but

relevant roles.

There is a Terminal Management System that manages issuance/ blocking/ application updating of

POS devices; a Card Management System to manage issuance, hot- listing and re- issuance of cards.

All these systems are a result of the field experience gained over the last 4 years in tough and

remote locations. These systems provide services that are very relevant to entities operating in this

sector.

Solutions

Customer Enrolment Solutions

FINO has developed applications that can be used to acquire micro customers in the field using

simple processes and minimalist of the hardware (including mobiles) to address the infrastructure

challenges on the ground. FINO also offers services to Indian entities to rapidly acquire micro

customers using this technology. FINO is currently acquiring customers at the rate of 50,000 per day.

Customer Acquisition System

The system allows customers to be enrolled/ acquired at their door step unlike a bank model which

forces customers to come to the branch. The process is quicker and simpler both for the customer

and the bank, yet maintains the banking rigour.

Operations Solutions

This component manages all logics for data messaging to generate information for day-to-day

planning and management of operations. The principals may utilize some of the pre-designed

reports by FINO or ask for customized reports.

21 | P a g e

Hardware Solutions

FINO Financial Inclusion Solution is driven by robust yet affordable technology and products. FINO

provides a full suite of biometric products for enrolment, storage and verification with all back end

system elements to achieve different financial inclusion applications.

This technology will enable our clients to offer a rich spread of simple and accessible solution with

our range of products including hand held devices, biometric smart cards, backend switch, Micro

Deposit Machine.

Services

Business Correspondent Services

FINO FINTECH FOUNDATION

FINO has formed FINO Fintech Foundation to enable its solutions to reach micro customers. This is a

Section 25 company under the Indian Companies Act of 1956 has been incorporated in June 26th

2007.

FINO FINTECH FOUNDATION has been established to carry on the activity of promoting sustainable

livelihoods for the rural poor and underserved classes by helping them become economically self-

reliant, through the provision of Financial and Insurance services and technical assistance in an

integrated and sustainable manner.

The activity of this Company is not for profit and is working with FINO’s partners to establish an end

to end distribution platform thereby ensuring reach to Banks and other financial institutions in those

geographies and amongst that section of the population which has been considered

ROLE OF FINO FINTECH FOUNDATION

Creation of Bandhu (FINO Agents) network across the country to deliver financial services through a

combined technology-and-distribution channel to enable a rapid reach-out to the under-banked

population.

Assist banks in designing new products and services for the under-banked populations by working

closely with them, and acting as the key resource who truly understands end-customer’s financial

needs.

Managing a training and audit calendar with the banks to ensure that the entire distribution network

works in alignment with the overall mandates given by the banks

22 | P a g e

Financial Literacy Program

We define Financial Literacy as "Knowledge of basic financial concepts and the skills to translate this

knowledge into improved financial behaviours".

Hence, as an independent channel we not only provide access to financial products and services but

also focus on making customers aware about them through our various financial literacy initiatives.

Our financial literacy programs focuses on teaching the knowledge and skills required to adopt good

money management practices for budgeting, spending, and saving. Participants in these programs

become equipped with the information and tools to make better financial choices, work towards

their financial goals, and enhance their economic well-being.

The FINO program will result in higher financial stability of the customers, reduced financial stress

(vulnerability), better saving habits, and higher usage of formal savings accounts (provided by banks)

through the FINO card. Changes in budgeting and savings behaviour as well as the ability to

effectively use the FINO technology will result in increase household well-being for customers.

Currently FINO is running various financial literacy campaigns with World Bank, International Finance

Corporation (IFC), Microfinance Opportunities, NABARD and UNDP as partners.

FINO Consultancy Services

FINO Consultancy Services (FCS) aims to bridge the divide between formal financial institutions and

the un-banked/under-banked populations across the world by bolstering emerging branchless and

micro-banking channels and entities with technology, public policy, channel management

consultancy and knowledge sharing.

FINO provides its consultancy expertise to National Governments, Central Banks, Commercial and

Cooperative Banks, Microfinance Institutions, Insurance Companies and Not-for-Profits. FCS brings

on board capabilities in the areas of technology architecture, strategy and planning, implementation,

product designing, regulation and policy framework, channel management and capacity building.

FINO as a Consultant provides customised services, working in tandem with each client to deliver

solutions that are best equipped to tackle the challenges present. FCS recognizes the importance of

sustainability for any financial entity, and is actively engaged in developing practical and profitable

business cases, keeping in mind the client’s strategy.

Furthermore, FINO assists in the implementation of these recommendations wherever required,

drawing on its years of practical experience.

FINO as a branchless banking consultant facilitated designing of financial products and delivery

channels to bring more people under the ambit of financial inclusion in association with "Enabling

Financial Innovation and Access" in Nigeria, Africa

23 | P a g e

Project Specific Analysis

Product Profile

Micro- Insurance

FINO micro insurance is a service that enables insurance companies to reach out to low-income

customers and serve their needs, while maintaining financial viability. The product/service taps into

the existing, proven network of Smart Card holders who can access other financial services from the

same card.

FINO micro insurance acts as the middle layer or delivery channel between the insurance company

and end-customer, providing the geographical coverage, scalable technology platform and

processing capabilities for insurance business. This enables cashless and paperless insurance

processing to effectively reach micro transaction customers.

FINO micro insurance uses technology to cut costs, maximize efficiency and ensure sustainable

delivery of micro insurance services offered by various insurance companies.

This is a product of ICICI Bank which is being offered and sold by FINO. This product has following

features:

Marketing Mix

Product

Pricing

Promotion

Place People

Process

Physical Evidence

24 | P a g e

Product: The product in service marketing mix is intangible in nature. Like physical products such as

soap or a detergent, service products cannot be measured. At the same time service products

are heterogeneous, perishable and cannot be owned. The service product thus has to be designed

with care. Generally service blue printing is done to define the service product. Features:

Duration: 1 year

Claim: `. 1, 00,000/-(In case of death or 100% Disability) and `. 50,000/-(In case of accident

or 50% Disability).

Pricing: Pricing in case of services is rather more difficult than in case of products. Generally service

pricing involves taking into consideration labour, material cost and overhead costs. By adding a

profit mark up you get your final service pricing. Features:

Premium of `. 100/- for one year.

Place: Place in case of services determine where the service product is going to be located.

Sonepat, Haryana.

Promotion: Promotions have become a critical factor in the service marketing mix. Services are

easy to be duplicated and hence it is generally the brand which sets a service apart from its

counterpart. Features:

Word of mouth.

Door to door.

People: People are one of the elements of service marketing mix. People define a service. In case of

service marketing, people can make or break an organization.

Bandhus.

Office Staff.

Process: Service process is the way in which a service is delivered to the end customer. The process

of a service company in delivering its product is of utmost importance. It is also a critical component

in the service blueprint, wherein before establishing the service, the company defines exactly what

should be the process of the service product reaching the end customer.

Physical Evidence: The last element in the service marketing mix is a very important element. As

said before, services are intangible in nature. However, to create a better customer experience

tangible elements are also delivered with the service. Several times, physical evidence is used as a

differentiator in service marketing.

Company Office.

25 | P a g e

Product Life Cycle Product life-cycle management (or PLCM) is the succession of strategies used by business

management as a product goes through its life-cycle. The condition in which a product is sold

(advertising, saturation) changes over time and must be managed as it moves through its succession

of stages.

Introduction Stage: In this stage, company tries to build product awareness and to develop a

market for it. Its impact on marketing mix is as follows:

Product Branding and level of quality is established, as well as intellectual properties e.g.

patents & trademarks are obtained.

Pricing strategy can be low penetration so as to build market share, or may be high

penetration so as to recover development costs.

Distribution is limited/ selective until consumers show acceptance to the product.

Promotion is to target at innovators and early adopters.

Growth Stage: In this stage, company tries to build brand preference and increase market share. Its

impact on marketing mix is as follows:

Product quality which has already been established is maintained and additional features

and services are generally added.

Pricing is maintained as the firm enjoys increasing demand with little competition.

Distribution channels are increased as demand increases as consumers accept the product.

Promotion is targeted at mass audience.

26 | P a g e

Maturity Stage: In this stage, sales increases at decreasing stage. Competitors come up with similar

products. The main objective in this stage is to defend market share while maximizing profits. Its

impact on marketing mix is as follows:

Product features may increase for differentiating the product from others.

Pricing may decrease due to increasing competition.

Distribution becomes more intensive and intensives may be offered to encourage

preference over competing products.

Promotion is targeting on product differentiation.

Decline Stage: In this stage, sales of the firm decreases. Now, the firm has several options:

Product is maintained, possibly by rejuvenating it by adding new features and finding new

users.

Product is harvested- reducing costs and continuing to offer it, possibly to a niche segment.

Discontinue the product, liquidating remaining inventory or selling it to another firm which is

willing to continue the product.

Our product micro-insurance is in growth stage as it is started only an year before in FINO.

27 | P a g e

Competitors Analysis

HCL BFSI (PSB)

There are a variety of financial services which HCL is providing today.

HCL’s offering:

Enrolment software.

Single Integrated Handheld smart device with connectivity.

Server Infrastructure.

Provide network connectivity & Interface.

Provide SMS/GPRS Interface.

Bilingual FI Solution.

Smart cards & Card personalization.

HCL Info systems bags another prestigious Financial Inclusion project from Punjab and Sind Bank

under its Systems Integration BFSI Practice

HCL Info systems selected as partner of Punjab & Sind Bank’s Financial Inclusion Project

Deal to make banking accessible to unbanked villages through technology

To roll out in more than 1500 villages across the nation

HCL Info systems Ltd., India’s premier Hardware, Services and ICT System Integration Company,

today announced the awarding of an order from Punjab and Sind Bank (PSB) to provide smart card

based solutions in over 1500 villages across the country. The partnership aims to facilitate the

provision of smart card-based technology solutions for financial inclusion, besides engaging and

managing business correspondents deployed in unbanked villages allotted to PSB.

HCL Info systems will be providing end-to-end solutions for PSB’s Financial Inclusion project involving

supply of the Core Banking and enrolment software, DC and DR, customization, installation,

operation, maintenance of Servers and Networking; management and maintenance of hardware &

software, delivery & support for banking & financial services to the Bank. Apart from technological

solution and technical services, it will also involve integration of various technological and functional

components, supporting business correspondents to educate, facilitate and deliver financial services

to the targeted BPL beneficiaries.

The project will enable UID based disbursement for various schemes of the Rural Development

Department. PSB aims to cover over 6 Lac customers over a period of three years.

28 | P a g e

TCS BaNCS (Indian Bank)

TCS bags Financial Inclusion Solution Project from Indian Bank

Indian Bank has selected TCS for its Financial Inclusion Solution project. The Deal value pegged at

INR 850 million for three years. TCS’ cloud computing services will be used to enable banking

services for rural customers in 5,500 villages.

TCS is deploying its TCS BaNCS Financial Inclusion Gateway solution for executing the bank’s

requirements for this project. The applications will be hosted on cloud computing technologies to

create an easy-to-access, highly-secured environment that provides reliable world-class

infrastructure and application services in a cost-effective and efficient manner.

Financial inclusion is the delivery of banking services at an affordable cost to low-income groups at

places where mainstream banking facilities are unavailable. This solution will help the bank deliver

benefits to the general public and provide an end-to-end, cost-effective solution. Currently, 41% of

the Indian population is unbanked (80 million households). Out of this, 40% is unbanked in the urban

areas and 60% in the rural areas.

Indian Bank has been serving customers for more than a century and is seen as a front-runner in

specialized banking as well as rural development. The bank had deployed TCS BaNCS across 1802

branches to offer finely-tailored products to its corporate and retail customers.

Tata Consultancy Services Ltd has won a project for implementing a smart card-based financial

inclusion solution worth Rs 850 million from Indian Bank.

COROMANDEL INFOTECH India Ltd Coromandel InfoTech bags the World Bank's Karnataka Health Systems Development and Reform

Project.

Coromandel InfoTech India Limited, an IT initiative of THE INDIA CEMENTS LTD, has been selected as

technology solution partner for the World Bank's initiative "Karnataka's Health Systems

Development Project" to provide technical solution to strengthen governance & improve the

monitoring in the World Bank Operations in India.

In this project, the world Bank and the Karnataka government pilots the beneficiary verification

platform to improve monitoring and evaluation capacity, timeliness and reliability of the field data

collection, electronically verify service delivery and collect the feedback to the services delivered.

Conceptualized by the World Bank, the project aims to create information based IT systems in real

time basis. Coromandel InfoTech will deploy the appropriate technologies to collect and submit the

data to the World Bank. This project will also present a citizen interface to provide basic services to

the participants. Information collected will be uploaded and made available to everyone in the real

time or near real time depending upon the local conditions.

29 | P a g e

Federal Bank inaugurated Financial Inclusion Project with Coromandel Infotech as Technology

Service Provider - 18th Dec, 2010

Ms.Suma Verma, Regional Director (Kerala & Lakshadweep), RBI Inaugurated the ICT based Financial

Inclusion Project for Federal Bank with Coromandel InfoTech as Technology Service Provider at

Alappuzha on 18 December 2010. Mr.Chalapathy Rao, Head – Microfinance lighted the lamp in the

presence of Mr.Shyam Srinivasan, Managing Director & CEO, Mr.Kalyanaraman, Executive Director

and Mr.Sashi Kumar M, Deputy General Manager of Federal Bank.

BASIX

Financial Inclusion Services (FINS) – are provided to fulfil working capital & investment needs of the

clients – the poor household. It includes savings, credit – short term and long term, insurance for

lives and livelihoods, fund transfers, commodity derivatives, financial orchestration – ranging from

grants to equity for livelihoods.

Insurance

Savings

Microcredit

Remittances

TAFI

On August 27th, 2007 BASIX launched a project on Technology Assisted Financial Inclusion in a few

low-income neighbourhoods in Delhi and Muzzafarpur, Bihar. This pilot covers an urban and a rural

location, and can potentially be scaled across all BASIX locations. This is being done as the Business

Correspondent of Axis Bank, on the basis of a tripartite agreement between BASIX, Axis Bank and the

technology provider, A Little World.

By December 2007, BASIX had enrolled over 4000 customers for no-frills saving bank accounts. The

account opening of these customers has been done inside slums and villages on the basis of very

basic Know Your Customer (KYC) documents. The customers are being issued biometric

authentication based smart cards. These customers now have access to both savings and withdrawal

services, in addition to other financial services at either a SPOT (Specified Point of Transaction)

within 5 Km. of their homes, or at their doorstep.

The current services being offered include

savings,

insurance,

remittances,

credit,

30 | P a g e

And other financial services such as pensions and systematic investment plans (SIP) of mutual funds

will also be offered soon.

The customers include rickshaw pullers, hawkers and vendors, rag pickers, scrap collectors, auto

drivers, illiterate and poor women. The customers include both those directly engaged in low-grade

economic activities, and those who have a need to save, regardless of any direct income earning

activity.

The technology used is Near Field Communications, and transactions are done with a kit comprising

a mobile phone, a fingerprint scanner and a printer. Transactions can be done both online (instant

server updation) or offline, for remote areas where there is no signal. The field operators carrying

the transaction-kit is the human equivalent of an ATM Machine, with mobility added. The

technology allows for effective risk-management and fraud control.

BASIX plans to maximize the impact of the BC framework by combining a suite of financial and non-

financial services, to enable sustainable strides towards greater inclusion and stronger livelihoods.

This requires offering multiple services and high operational efficiency, while managing technology

well, which we are working towards.

31 | P a g e

On Site Project Report

Current Strategy

There is no written strategy as such. However, what I’ve observed is mentioned below:

Promotion - Word of mouth Strategy, Door- to –Door Strategy.

Place – At the time of pension disbursement.

Promotion – Word of Mouth

Word-of-mouth marketing (WOMM), also called word of mouth advertising, is an unpaid form of

promotion—oral or written —in which satisfied customers tell other people how much they like a

business, product, service, or event. Word-of-mouth is one of the most credible forms of advertising

because people who don't stand to gain personally by promoting something put their reputations on

the line every time they make a recommendation.

As, target consumers are not financially literate and do not understand the benefits of the product

by advertisement or any other means. This is the best method of promotion. They basically apply it

at the time of pension disbursement. While the pension is being distributed among the people, we

go there with our “Bandhu” who is a resident of the village, so that people can rely on him and we

can connect better with our target consumer.

“Bandhu” asks the consumers to do insurance and tells him the benefits, as soon as one consumer

buys our product, we ask him to tell the benefit to others as well. Now, other people come and ask

for the product from “Bandhu” who is the person of their village and they already know. This makes

the promotion of our product and the sale increases.

Promotion- Door to Door

Door-to-door is a sales technique in which a salesperson walks from the door of one house to the

door of another trying to sell a product or service to the general public. A variant of this involves cold

calling first, when another sales representative attempts to gain agreement that a salesperson

should visit. Door-to-door selling is usually conducted in the afternoon hours, when the majority of

people are at home.

As, all people are not covered while pension is distributed, so they go for door to door selling

technique. The person who goes door to door is our “Bandhu” who is a person from village and

people already know him. He explains the benefits to the person and hence sells our product.

However, here also he carries the references of people who already brought our product so that

people can rely on it.

32 | P a g e

Work Performed

During SIP period, I’ve visited following villages along with “Bandhu” and their “Business

Coordinators”. The villages visited are mentioned below:

Bhawad

3Puthi

Ashraf Matindu

Kundal

Rampur

Teha

Sanpera

These were the villages with high customer enrolments and transactions i.e. people already knew

about our services. So, we need to sell our product to them.

Gopalpur

Asadpur

Baroli

Makinpur

Bajna Khurd

Pugthala

Kailana

These were the villages with low customer enrolments so, we added new people in our network as

customers by consulting them and telling them about financial services offered by us. Here, we

made their bio-metric cards and asked them to do transactions regularly.

While visiting to villages we did insurance of people using the strategies mentioned above. Here, I

personally talked to several people in every village to understand them better. While talking to

villagers, we figured out various facts which are mentioned below:

Findings

“Bandhu” is an important person for the sale of insurance product as he should be reliable

and known to the target consumers.

“Bandhu” is an important person while doing financial inclusion i.e. customer enrolments

and transactions of customers.

Rural people are not financially literate; they are purchasing the product only on the basis of

reference and relations.

Rural people do not believe on outsiders easily, though there are certain barriers e.g. area

difference, language difference and they can believe on a person from their village instantly.

33 | P a g e

Recommendations

Financial Literacy Program

As, we have figured out that rural people are not financially literate.

We should held camps wherein we can teach them about financial products. This will help

them in becoming financially independent.

During these camps we should promote our firm in form of print media e.g. “Flex”,

“Pamphlets (In Hindi, people depicting rural people)”.

During these camps we should teach them about how to manage their finance and benefits

of using banks and other services for investing their money.

We can make them not only financially aware however; we can also tell them the benefits of

micro-insurance which can benefit them and their family.

We can promote and do insurance at the time of crop harvesting. This is a time when people

have money and are ready to spend it.

“Bandhus” should have proper uniform with company logo which will help in branding for

the firm in minds of consumers.

“Bandhus” should get an ID card which they should wear all the time, this will create an

impact on consumer’s mind and they’ll rely on company.

There should be one office (a room) in every region for every “Bandhu”. By this, people will

be having one stop/place for getting in touch with company. These factors position company

as reliable in minds of consumers.

34 | P a g e

Learning from SIP

Followings are the learning from SIP:

Product should match the consumer’s need.

Promotion is not only about sales. As we are achieving sales, however, consumers are not

aware about product’s benefits and services.

Promotion not only means advertisements and all. It can be done from various other

methods e.g. print media (flex, pamphlets).

It’s important that consumers should be aware of the product details and its benefits. If

consumers are educated then, sales can automatically increase.

It’s important to have a position in consumer’s mind so that they can relate to us in a better

way and can refer others about our product.

Promotion for a company may get product specific, but it is only which helps in building

brand.

35 | P a g e

References

http://birdindia.org.in/doc/Reoprt%20on%20Microinsurance%20in%20India%20_Final.pdf

http://www.icrier.org/pdf/wp162.pdf

http://www.microfinanceindia.org/roundtable-report/Client-Education-and-Microinsurance-

Roundtable-Report-revised.pdf

http://www.marketing91.com/service-marketing-mix/

http://en.wikipedia.org/wiki/Marketing_mix